The increase in the standard of living in the US over the past century is the result of

a positive growth rate of output

The standard of living increases if:

productivity and the share of the population employed grow

The talents, education, training, and skills of workers are known as

human capital.

A good that is long-lasting and is used to produce other goods is called

capital good.

Getting a college degree is an example of investing in

Human capital

Mike and Tom debone chicken breasts for Ted’s chicken Co. Mike is new and can only debone 60 chicken breasts per hour, while Tom’s experience allows him to debone 120 chicken breasts per hour. Both Mike and Tom work 40 hours per week. Their average hourly productivity is:

(60+120)/2 = 90

Increasing the capital available to the workforce, holding other factors constant, tends to ______ total output at a(n) ______ rate.

increase; decreasing

Diminishing returns to capital implies that, holding labor and other inputs constant, as more capital is added, each additional unit of capital adds

less to production.

Alpha has $40000 of capital per worker, while Beta has $5000 of capital per worker. According to the principle of diminishing returns to capital, an additional unit of capital will increase output _______ in Alpha compared to Beta, holding other factors constant.

less

Which of the following is a measure that policymakers might take to raise a country's rate of economic growth?

a. Increase human capital
b. Promote saving and investment
c. Support research and development
d. Provide an appropriate political and legal framework

Most economists agree that _______is/are detrimental to economic growth.

political instability

At the time it collapsed in 1991, the Soviet Union possessed all of the factors that promote increases in economic growth EXCEPT:

a political and legal environment that promoted economic productivity.

Which of the following statement is false?
a) The main source of increase in the standard of living since the 1960’s has been the increase in labor productivity.
b) The increase in the percentage of people employed in the population has increased the standard of living since the 1960’s.
c) In the future, economists expect that labor productivity will increase.
d) In the future, economists expect that the percentage of people employed in the population will strongly increase.
e) In Europe, the standard of living is lower than the US standard of living.

In the future, economists expect that the percentage of people employed in the population will strongly increase.

Land and natural resources are not a necessary condition for GDP growth

The increase in productivity growth in the second half of the 1990’s is largely due to:

The increase in investment in IT in the 1980’s (Invest ahead of time!)

The fictitious country "Alpha" has a real GDP of $18,600, a population of 30 and 20 employed workers. If a new technology is introduced that increases real GDP to $25,000, what is the increase in average labor productivity in Alpha (measured in $) as a result of the technological change?

320

The biggest barrier to growth for many of the poorest countries in the world is the need for:

improved legal and political frameworks

High rates of saving and investing in the private sector promote economic growth by

increasing physical capital

The saving rate is equal to

saving divided by income.

Wealth can be defined as

assets minus liabilities

Increases in the value of existing assets are known as

capital gains.

Saving to meet long-term objectives is called

life-cycle saving

Saving for the purpose of leaving an inheritance is called

bequest saving.

Saving to protect against unexpected setbacks is called

precautionary saving.

Middle-class families that were once content with medium-priced cars, but now feel the need to drive expensive cars to keep up with community standards illustrate which of the following effects?

Demonstration effect

If tax collections exceed government spending, there is a budget

surplus.

For the past 20 years, the saving rate of US households
a) has

has been decreasing like in most industrialized countries.

In the 1990’s, US households’ wealth has ______ because ________.

increased; of capital gains.

During the second half of the 1990’s, national savings ________ because ________.

When you use money as a basic yardstick for measuring economic value, it is serving which function?

unit of account

When you use money to buy lunch, it is serving which function of money?

medium of exchange

When you keep a $10 bill in your piggy bank and it is still worth $10 a year later, your money has served which function?

store of value

Cash or similar assets held by banks for the purpose of meeting depositor withdrawals and payments are knows as

bank reserves.

Which of the following the most frequent tool used by the Fed to use to control the money supply?

open market purchases

An episode in which depositors rush to withdraw their deposits from the banking system is called a bank

panic

Which of the following was instituted to prevent depositors from rushing to withdraw their deposits from fear that their bank will go bankrupt?

Deposit insurance

M2 includes M1 as well as:

Less liquid assets

Currency is ______ the M1 measure of money and ________ the M2 measure of money.

included in; included in

In Econland, the public does not hold any currency . There is a $5,000,000 initial deposit in a commercial bank. If the banks' reserve/deposit ratio is 10%, the money supply in Econland equals:

$50,000,000

(5,000,000/10%)

In Macroland there is $1,000,000 in currency that can either be partially held by the public or used by banks as reserves. Assuming the public continues to hold the same amount of currency, if banks' reserve/deposit ratio increases from 10% to 15%, the money supply in Macroland will ______.

decrease.

In Macroland, suppose that the public holds 200,000 in currency and the initial deposit is 800, 000.
Assuming the public continues to hold the same amount of currency, if banks' reserve/deposit ratio is 20%, the Final consolidated balance sheet of commercial banks show that commercial banks have lent a total amount equal to:

3,200,000

Total deposits=800000/20%=4000000
Total reserves=800000
Total loans=3200000

In Macroland, suppose that the public holds 200,000 in currency and the initial deposit is 800, 000.
Assume the public continues to hold the same amount of currency and the banks' reserve/deposit ratio is 20%.
The total amount of money in Macroland is:

4,200,000

(200000+800000/20%)

In Macroland, suppose that the public holds 200,000 in currency and the initial deposit is 800, 000.
Assume the public continues to hold the same amount of currency and the banks' reserve/deposit ratio is 20%.
Suppose the Fed conducts an open market purchase for 200,000, the total amount of money in Macroland after the open market purchase is:

5,200,000

money creation due to the open market operation: 200000/20%=1000000. This adds up to the 4200000 already in the economy.

Suppose the Fed conducts an open market sale for 200,000, the total amount of reserves in commercial banks in Macroland after the open market sale is:

600,000

(800000-200000)

In the recent past, the Fed has tried to increase liquidity in credit markets by:

purchasing risky assets from commercial banks

The Federal Open Market Committee makes decisions about ____ policy.

monetary

According to the quantity equation if velocity and real GDP are constant and the Federal Reserve increases the money supply by 5 percent, then the price level:

increases by 5 percent

If velocity is constant, real GDP growth is 2% and the growth rate of money is 7%, then according to the quantity equation, inflation is:

a) the difficulty faced by banks to find liquidities in the market through securitization.
b) the decline in the market value of banks' assets and their resulting bankruptcies .
c) the credit crunch experienced by potential borrowers.

Bond prices and interest rates are

inversely related.

A regular payment made to a partial owner of a firm is called a(n)

equity.

A legal promise to repay a debt, including both the principal amount and regular interest payments describes a

bond

Spreading wealth over a variety of different financial investments to reduce overall risk is known as

diversification

The value of a stock is _________ related to expected dividend payments and ________ related to the market interest rate

positively; negatively

High rates of saving and investing in the private sector promote economic growth by

increasing physical capital

At the begining of 1998 - Smith's wealth was $100,000 - they don't save anything that year. experience housing ,arket gains equal to $40,000 what was their wealth @ end of 1998?

140,000

in 1990's, US households' wealth has __________ because __________ .

increased; of capital gains

The saving rate of american households is currently about:

5%

Durring the second half of the 1990s, national savings _______ because_______.

have increased; the government has run a surplus

In a closed economy, and increase in government deficits _____ national savings and results in _______ interest rates and _______ investments.

decreased; increased; decreased

The effect of _____ on ______ is called the crowding-out effect.

deficits; investments

In a closed economy, technological progress results in ______ national savings results in _____ interest rates and ______ investment.

Increases; Increased; Increased

What does monetary policy consist of?

Controlling money supply

Cash or similar assets held by banks for the purpose of meeting depositor withdrawals and payments are known as

bank reserves

Public holds: 300,000
Initial Deposit: 60,000
deposit ratio: 10%
total amount of money in the economy:

Public holds: 300,000
Initial Deposit: 60,000
deposit ratio: 10%
Open Market Purchase: 50,000
total amount of money in the economy:

1,400,000

An Open Market Sales:

1. Decreases the sum of reserves held by commercial banks
2. Decreases the sum of the deposits held by commercial banks
3. Decreases the amount of money in the economy

Quantity theory of money:
supposing constant velocity, if output grows at 2%/year, the growth rate of money is 5%, then inflation is:

M+V=P+Y
5%=P+2%
inflation = 3%

Quantitative easing is

the Fed buying long term government bonds with newly created money

The article "The Central Banks" from the economist, refers to the fact that public confidence in central banks has decreased because:

1. of their limited success in the face of the great recession
2. quantitative easing is unpopular due to the risk of inflation
3. of their inability to regulate financial markets prior to the credit crisis

article "The shift away from thrift" from 1980s-2005:

households saving has tend to decrease in industrialized countries and has been high in Asia

Article "The productivity gap between Europe and the US: Trends and Causes" slower productivity growth in Europe is due to :

slower productivity growth in market services

Quantitative easing is

the Fed buying long term government bonds with newly created money

The article "The Central Banks" from the economist, refers to the fact that public confidence in central banks has decreased because:

1. of their limited success in the face of the great recession
2. quantitative easing is unpopular due to the risk of inflation
3. of their inability to regulate financial markets prior to the credit crisis

article "The shift away from thrift" from 1980s-2005:

households saving has tend to decrease in industrialized countries and has been high in Asia

Article "The productivity gap between Europe and the US: Trends and Causes" slower productivity growth in Europe is due to :

slower productivity growth in market services

article "the great illusion" up to the recession of 2008, spending in the US is increasingly driven by: